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497 matches for " deficit":
The July trade deficit likely fell significantly further than the consensus forecast for a dip to $42.2B from $43.8B in June, despite the sharp drop in the ISM manufacturing export orders index. Our optimism is not just wishful thinking on our p art; our forecast is based on the BEA's new advance trade report. These data passed unnoticed in the markets and the media. The July report, released August 28, wasn't even listed on Bloomberg's U.S. calendar, which does manage to find space for such useless indicators as the Challenger job cut survey and Kansas City Fed manufacturing index. Baffling.
The April international trade numbers were startlingly, and surprisingly, horrible. The deficit in trade in goods leaped by $6.2B -- the biggest one-month jump in two years -- to $67.1B, though the headline damage was limited by a sharp narrowing in the oil deficit, thanks to lower prices, and a rebound in the aircraft surplus.
The U.K.'s still-large current account deficit makes us nervous that sterling will need to depreciate further over the medium-term and would collapse if Brexit talks fail, causing international investors to take flight.
Chief U.S. Economist Ian Shepherdson on the U.S. Trade Deficit
The picture of the economy's recent performance will be redrawn today, when the national accounts are published.
Recent export performance has been poor, but the export orders index in the ISM manufacturing survey-- the most reliable short-term leading indicator--strongly suggests that it will be terrible in the fourth quarter.
The CBO reckons that the April budget surplus jumped to about $179B, some $72B more than in the same month last year. This looks great, but alas all the apparent improvement reflects calendar distortions on the spending side of the accounts.
Today is all about beans. Specifically, soybeans, and more specifically, just how many of them were exported in August. This really matters, because if soybean exports in August and September remained close to their hugely elevated July level, the surge in exports relative to the second quarter will contribute about one percentage point to headline GDP growth.
The Chancellor kept his word and made only trivial policy changes in the Spring Statement, but he hinted at higher spending plans in the Autumn Budget.
Today's September international trade report will be the third to be distorted by hugely elevated soybean exports. The surge began in July, when soybean exports jumped by $3.6B--that's a 220% month-to-month increase--to $5.2B.
The closer we look at the startling surge in imports in the fourth quarter, the more convinced we become that it was due in large part to a burst of inventory replacement following the late summer hurricanes.
The main story to emerge from China's Economic Work Report is the extent of tax cuts, which on our calculations will leave a large funding hole.
Net trade has been a major drag on the economy's growth rate in recent quarters, and February's trade figures, released today, are likely to signal another dismal performance in the first quarter.
The U.K.'s balance of payments leaves little room for doubt that sterling would sink like a stone in the event of a no-deal Brexit.
We remain optimistic on the scope for sterling to appreciate this year, reflecting our views that a deal for a soft Brexit will be reached soon and that the MPC will resume its tightening cycle later this year.
China's National People's Congress yesterday laid out its main goals for this year, on the first day of its annual meeting.
Last week's balance of payments showed that the U.K. has made significant progress in reducing its reliance on overseas finance.
Sterling's depreciation has done little to remedy the U.K.'s dependence on external finance.
Brazil's current account deficit is stabilizing following an substantial narrowing since early 2015, thanks to the deep recession.
Brazil's external accounts continue to surprise to the upside, with the current account deficit remaining close to historic lows and capital flows performing better than anticipated, mostly due to higher-than- expected FDI.
The upturn in Mexico's trade balance in recent months stalled in May, but the underlying trend is still improving. Data yesterday showed that the seasonally adjusted deficit rose to USD700M in May, after a USD15M gap in April. Imports rose 2.9% month-to-month, offsetting a mere 0.7% increase in exports.
Bond investors in Italy voted with their feet on Friday with news that the government has agreed a 2019 budget deficit of 2.4%.
The advance trade data for February make it very likely that today's full report will show the headline deficit rose by about $½B compared to March, thanks to rising net imports of both capital and consumer goods, which were only partly offset by improvements in the oil and auto accounts.
Brazil's external accounts are well under control, despite the wider deficit in January, mainly driven by seasonal deterioration on the trade account.
Weak oil prices and flagging domestic demand reduces Japan's trade deficit in August.
China's unadjusted current account was effectively in balance in Q2, after the deficit in Q1.
Mexico's trade balance shrank slightly last year, to USD11B, from USD13B in 2016. The main driver was a big swing in the non- energy balance, to a record USD8.0B surplus, following a USD0.4B deficit in 2016.
Mexico's trade balance shrank slightly last year, to USD13B, from USD14.6B in 2015. An improvement in the non-energy deficit was the main driver, while the energy gap worsened.
Companies' profit margins have fared relatively well during this recovery, and on many measures, they are back to pre-crisis levels. But looking ahead, corporate profitability is set to be squeezed as labour takes a larger share of national income and the Government gets to grips with the budget deficit by increasing corporate taxation.
Brazil's external deficit fell marginally in October, but most of the improvement is now likely behind us. The unadjusted current account deficit dipped to USD3.3B, from USD4.3B in October 2015. The trend is stabilizing, with the 12-month total rolling deficit easing to USD22B--that's 1.2% of GDP--from USD23B in September.
The latest balance of payments figures, released Wednesday, look set to show that the current account deficit widened in Q3, underlying the U.K.'s vulnerability to a sudden change in overseas investor sentiment. The risk of a full-blown sterling crisis, however, is lower than the enormous current account deficit would appear to suggest.
Mr. Draghi's pledge in 2012 to do "whatever it takes to preserve the euro," and QE have stymied sovereign debt risk in the euro area. At the same time, the EU's relaxed position over debt sustainability was highlighted earlier this year by the Commission's decision to give France two more years to get its deficit below 3% of GDP. But Moody's downgrade of the French government bond rating last week to Aa2 from Aa1 serves as a gentle reminder to investors of the underlying fundamentals.
Global current account imbalances are back on the agenda. In the U.S., economic policies threaten to blow out the twin deficit, while external surpluses in the euro area and Asia are rising.
Colombia's trade deficit continued to narrow in Q3; a postive development now that EM are back in the firing line. Assuming no revisions, the marginal year-over-year dip in the September trade deficit means that the third quarter deficit was USD3.1B, down from US4.6B a year ago.
The holiday effects are at it again. C hina's trade balance dropped to a deficit of $5.0B in March, from a surplus of $33.5B in February, confounding expectations for a surplus of $27.5B.
Japan's trade balance deteriorated sharply in May, flipping to a ¥967B deficit from the modest ¥57B surplus in April.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
The US trade deficit unexpectedly widened by 17% to $46.6 billion in December from $39.8 billion in November.
Chief U.K. Economist Samuel Tombs on the U.K Deficit
A widening core trade deficit is the inevitable consequence of a strengthening currency and faster growth than most of your trading partners. Falling oil prices have limited the headline damage by driving down net oil imports, but the downward trend in core exports since late 2014 has been steep and sustained, as our first chart shows. The deterioration meant that trade subtracted an average of 0.3 percentage points from GDP growth in the past three quarters.
Is Japan's pending 15-month anything to write home about?
Chief U.K. Economist Samuel Tombs on U.K. Public Finances
Recent polls in Argentina suggest that Alberto Fernández, from the opposition platform Frente de Todos, has comfortably beaten Mauricio Macri, to become Argentina's president.
Today brings a ton of data, as well as an appearance by Fed Chair Powell at the Economic Club of New York, in which we assume he will address the current state of the economy and the Fed's approach to policy.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
The terrible scenes from Texas will play out in the economic data over the next few weeks.
Net foreign trade was a drag on GDP growth in the second quarter, subtracting 0.7 percentage points from the headline number.
The news in Brazil on inflation and politics has been relatively positive in recent weeks, allowing policymakers to keep cutting interest rates to boost the stuttering recovery.
Fourth quarter GDP growth is likely to be revised down today.
The publication yesterday of the BCB's second quarterly inflation report under the new president, Ilan Golfajn, revealed that inflation is expected to hit the official target next year, for the first time since 2009. The inflation forecast for 2017 was lowered from 4.7% to 4.4%, just below the central bank's 4.5% target.
It seems reasonable to think that manufacturing should be doing better in the U.S. than other major economies.
BanRep surprised everyone late Friday, moving ahead of the curve by starting a tightening cycle that had been expected to begin later in the year or in Q1. But the seven-board member succumbed in the face of persistent inflationary pressures, and voted unanimously to hike the main interest rate by 25bp to 4.75%, the first move since April 2014.
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
The Bank of Korea's two main monthly economic surveys were very perky in January.
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
We expect to learn today that the economy expanded at a 2.1% annualized rate in the fourth quarter, slowing from 3.4% in the third.
Fed Chair Powell sounded a lot like Janet Yellen yesterday, at least in terms of substance.
Net foreign trade made a positive contribution of 0.2 percentage points to GDP growth in the second quarter, matching the Q1 performance.
Yesterday's first estimate of full-year 2019 GDP in Mexico confirmed that growth was extremely poor, due to domestic and external shocks.
All the evidence indicates that growth in Mexican consumers' spending is slowing, despite the better- than-expected November retail sales numbers, released yesterday.
Markets often greet the monthly international trade numbers with a shrug.
The failure of House Republicans to support Speaker Ryan's healthcare bill has laid bare the splits within the Republican party. The fissures weren't hard to see even before last week's debacle but the equity market has appeared determined since November to believe that all the earnings-friendly elements of Mr. Trump's and Mr. Ryan's agendas would be implemented with the minimum of fuss.
The decline in headline durable goods orders in May, reported yesterday, doesn't matter.
Brazil's external accounts were a relatively bright spot again last year.
Data released last week confirm that the Argentinian economy ended 2017 strongly.
Brazil's external accounts were a relatively bright spot last year, once again.
Brazil's unadjusted current account surplus soared to USD2.9B in May, its highest level since 2006, from USD1.1B in May 2016.
Today brings an array of economic data, including the jobless claims report, brought forward because July 4 falls on Thursday.
The substantial gap between the key manufacturing surveys for the U.S. and China, relative to their long-term relationship, likely narrowed a bit in December.
The economic downturn and the Chancellor's unprecedented fiscal measures mean that public borrowing likely will be about four times higher, in the forthcoming fiscal year, than anticipated in the Budget just over two weeks ago.
CPI inflation looks set to remain below the 2% target this year, driven by sterling's recent appreciation and lower energy prices.
BanRep cut Colombia's key interest rate by 25 basis points last Friday, to 6.25%. We were expecting a bolder cut, as economic activity has been under severe pressures in recent months.
Yesterday's final manufacturing PMIs confirmed that all remained calm in the EZ industrial sector through February.
Something of a debate appears to be underway in markets over the "correct" way to look at the coronavirus data.
Yesterday's FOMC , announcing a unanimous vote for no change in the funds rate, is almost identical to December's.
Brazil's industrial production surprised to the downside in August, suggesting that manufacturing is struggling to gather momentum over the second half of the year.
Modern Money Theory has come up at two consecutive BoJ press conferences.
The biggest single surprise in the second quarter GDP report was the unexpected $28B real-terms drop in inventories.
The Fed pretty clearly wanted to tell markets yesterday that inflation is likely to nudge above the target over the next few months, but that this will not prompt any sort of knee-jerk policy response beyond the continued "gradual" tightening.
Markets will be extremely sensitive to economic data in the run-up to the MPC's next meeting on August 3, following signals from several Committee members that they think the cas e for a rate rise has strengthened.
Friday's advance Q4 growth numbers in the EZ were a bit of a dumpster fire.
Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.
We aren't convinced by the idea that consumers' confidence will be depressed as a direct result of the rollover in most of the regular surveys of business sentiment and activity.
The models which generate the ADP measure of private payrolls will benefit in May from the strength of the headline industrial production, business sales and jobless claims numbers.
Data released this week have confirmed that the Mexican economy is struggling and that the near-term outlook remains extremely challenging.
Brazil's external accounts remain solid, despite the recent modest deterioration, making it easier for the country to withstand external and domestic risks.
Brazil's external accounts were a bright spot last year, again.
The deterioration of global risk appetite and, in particular, domestic politics have put the Brazilian real under severe pressure in recent weeks.
While we were out, data released in Mexico added to our downbeat view of the economy in the near term, supporting our base case for interest rate cuts in the near future.
It is fair to say that the economic debate on fiscal policy has shifted dramatically in the last 12-to-18 months.
The agreement between Presidents Trump and Xi at the G20 is a deferment of disaster rather than a fundamental rebuilding of the trading relationship between the U.S. and China.
The number of coronavirus cases continues to increase, but we're expecting to see signs that the number of new cases is peaking within the next two to three weeks.
Friday's inflation and labour market data in the Eurozone were dovish.
The Redbook chainstore sales survey today is likely to give the superficial impression that the peak holiday shopping season got off to a robust start last week.
China will have to issue a lot of government debt in the next few years. The government will need to continue migrating to its balance sheet, all the debt that should have been registered there in the first place. This will mean a rapid expansion of liabilities, but if handled correctly, the government will also gain valuable assets in the process.
Yesterday's final manufacturing PMIs confirmed that the headline index in the euro area rebounded further last month.
The Fed will do nothing to the funds rate or its balance sheet expansion program today.
In yesterday's Monitor, we outlined how the government's plans to allow more migrants to register in cities could help counterbalance the effects of aging and put a floor under medium-term property prices.
Brazilian inflation is off to a bad start this year, but January's jump is not the start of an uptrend, and we think good news is coming.
India's Finance Minister Nirmala Sitharaman finally brought out the big guns on September 20, announcing significant cuts to corporate tax rates.
We can't yet know how bad the spread of the coronavirus from the Chinese city of Wuhan will be.
Colombia's recently-released data signal that the economy started the year quite strongly, following a relatively poor end to Q4.
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
We've seen some alarming estimates of the potential impact on inflation of the House Republicans' plans for corporate tax reform, with some forecasts suggesting the CPI would be pushed up as much as 5%. We think the impact will be much smaller, more like 1-to-11⁄2% at most, and it could be much less, depending on what happens to the dollar. But the timing would be terrible, given the Fed's fears over the inflation risk posed by the tightness of the labor market.
The June durable goods, trade and inventory reports today, could make a material difference to forecasts for the first estimate of second quarter GDP growth, due tomorrow.
The president was on the warpath with the Fed again yesterday, in an interview with the Wall Street Journal.
Argentina's economy continues to recover steadily.
Inflation in the biggest economies in the region remains close to cyclical lows, allowing central banks to ease even further over the next few months.
The weaker is the economy over the next few months, the more likely it is that Mr. Trump blinks and removes some--perhaps even all--the tariffs on Chinese imports.
The latest data from container ports around the country are consistent with our view that imports are still correcting after the surge late last year, triggered by the hurricanes.
The Eurozone's external surplus rebounded further over the summer.
As we write, the Commons appears to be on the verge of voting for the Withdrawal Agreement Bill--WAB--at its second reading but then voting against the government's "Programme Motion", which sets out a very tight timetable for its passage through parliament, in a bid to meet the October 31 deadline and to minimise parliamentary scrutiny.
The Eurozone's current account surplus remained close to record highs at the end of Q1, despite dipping slightly to €34.1B in March, from a revised €37.8B in February. A further increase in the services surplus was the key story.
The Spanish economy has been living a quiet life recently, amid markets' focus on political risks in Italy and manufacturing slowdowns in Germany and France.
China's growth can be decomposed into the structural story and the mini-cycle, which is policy- driven.
Brazil's mid-June inflation reading surprised to the downside, falling to 9.0% from 9.6% in May. The reading essentially confirmed that May's rebound was a pause in the downward trend rather than a resurgence of inflationary pressures. A 1.3% increase in housing prices, including services, was the main driver of mid-June's modest unadjusted 0.4% month-to-month rise in the IPCA-15.
High interest rates and inflation, coupled with increasing uncertainty, put Mexican consumption under strain last year.
Data released on Monday showed that Chile's external accounts remained under pressure at the start of the year, and trade tensions mean that it will be harder to finance the gap.
The PBoC's quarterly monetary policy report seemed relatively sanguine on the question of PPI deflation, attributing it mainly to base effects--not entirely fairly--and suggesting that inflation will soon return.
Japanese policymakers will have been scouring yesterday's data for signs that the trade situation is improving.
The prospect of fiscal stimulus in the euro area-- ostensibly to "help" the ECB reach its inflation target-- remains a hot topic for investors and economists.
The Eurozone's total external surplus hit the skids at the start of the year. Yesterday's report showed that the seasonally adjusted current account surplus plunged to a two-year low of €24.1B in January, from a revised €30.8B in December.
Most LatAm currencies have been under pressure recently, with the Brazilian real and the Chilean peso breaking all-time lows versus the USD in recent weeks.
The public finances are in better shape than October's figures suggest in isolation. Public sector net borrowing excluding public sector banks--PSNB ex.--leapt to £11.2B, from £8.9B a year earlier.
Inflation in Mexico surprised to the downside in late Q3, supporting our core view that it will continue to fall gradually over the coming months.
Colombia's economy activity is deteriorating rapidly, suggesting that BanRep will have to cut interest rates on Friday. Incoming data make it clear that the economy has moved into a period of deceleration, painting a starkly different picture than a year ago.
The PBoC cut its seven-day reverse repo rate to 2.20%, from 2.40%, while making a token injection; the Bank only moves these rates when it injects funds.
We were wrong about headline durable goods orders in April, because the civilian aircraft component behaved very strangely.
The dovish members of Banxico's board garnered further support on Friday for prolonging the current easing monetary cycle over coming meetings.
China's annual "two sessions" conference is due to start on Sunday, with the economic targets for this year set to be made official over the course of the meetings.
Fed Chair Powell's semi-annual Monetary Policy Testimony yesterday broke no new ground, largely repeating the message of the January 30 press conference.
Yesterday's raft of data had no net impact on our forecast for second quarter GDP growth, which we still think will be about 21⁄4%.
The Fed wants price stability--currently defined as 2% inflation--and maximum sustainable employment.
We expect today's first estimate of third quarter GDP growth to show that the economy expanded at a 2.4% annualized rate over the summer.
The last few years have thrown up surprise after surprise for establishment parties. Mr. Abe's Liberal Democrat Party is about as establishment as they come.
Today's wave of data will bring new information on the industrial sector, consumers, the labor market, and housing, as well as revisions to the third quarter GDP numbers.
The BRL remains under severe stress, despite renewed signals of a sustained economic recovery and strengthening expectations that the end of the monetary easing cycle is near.
Recent political and economic developments in Brazil make us more confidence in our forecast of a gradual recovery. On Wednesday, interim President Michel Temer scored his first victory in Congress, winning approval for his request to raise this year's budget target to a more realistic level. Under the new target, Brazil's government plans to run a budget gap, before interest, of about 2.7% of GDP this year.
Brazil's inflation rate remained well under control over the first half of February. We see no threats in the near term, indicating that more stimulus will be forthcoming from the BCB.
Federal Reserve Chair Janet Yellen's testimony this week reinforced our view that the first U.S. rate hike will be in June. The transition to higher U.S. rates will require an unpleasant adjustment in asset prices in some LatAm countries.
Three of today's economic reports, all for December, could move the needle on fourth quarter GDP growth. Ahead of the data, we're looking for growth of 1.8%, a bit below the consensus, 2.2%, and significantly weaker than the Atlanta Fed's GDPNow model, which projects 2.8%.
We're braced for a hefty downside surprise in today's durable goods orders numbers, thanks to a technicality.
Mexican inflation fell sharply in the first two weeks of January, dipping by 0.2% from two weeks earlier, thanks to lower energy prices and a reduction in long-distance phone tariffs. Telecom reform explains about 15bp of the headline reduction.
Data released yesterday confirmed that Mexico's economy ended Q4 poorly, confounding the most hawkish Banxico Board members.
The key data today, covering March durable goods orders and international trade in goods, should both beat consensus forecasts.
We didn't believe the first estimate of Q1 GDP growth, 0.7%, and we won't believe today's second estimate, either. The data are riddled with distortions, most notably the long-standing problem of residual seasonality, which depressed the number by about one percentage point.
Hong Kong delivered a resounding landslide victory to pro-Democracy parties in district council elections over the weekend.
We have tweaked our third quarter GDP forecast in the wake of the September advance international trade and inventory data; we now expect today's first estimate to show that the economy expanded at a 4.0% annualized rate.
Mexico's economic picture remains positive, although the outlook for 2019 is growing cloudy as the economy likely will lose momentum if AMLO's populist approach continues next year.
We were terrified by the plunge in the ISM manufacturing export orders index in August and September, which appeared to point to a 2008-style meltdown in trade flows.
Mexico's final estimate of third quarter GDP, released yesterday, confirmed that the economy is still struggling in the face of domestic and external headwinds.
The Fed is on course to hike again in December, with 12 of the 16 FOMC forecasters expecting rates to end the year 25bp higher than the current 2-to-21⁄4%; back in June, just eight expected four or more hikes for the year.
The BoJ has no good options, and its leeway for changes to existing policy instruments is limited.
Yesterday's economic reports in the Eurozone were solid across the board.
Chile's economic outlook remains challenging. Overall, 2015 will likely mark the second consecutive year of disappointing growth, but it will be better than 2014, a year to forget.
The jump in oil prices over the past two trading days eventually will lift retail gasoline prices by about 35 cents per gallon, or 131⁄2%.
We raised our forecast for today's January payroll number after the ADP report, to 200K from 160K.
Our hope for a year-end jump in German factory orders was laughably optimistic.
All the signs are that ADP will today report a solid increase in February private payrolls; our forecast is 200K, but if you twist our arms we'd probably say the mild weather last month across most of the country points to a bit of upside risk.
Yesterday's economic reports in the Eurozone were mostly positive.
German factory orders probably bounced a modest 0.3% month-to-month in February, equivalent to a 0.5% decline year-over-year. We expect private investment growth to have picked up in the first quarter, but leading indicators for the industrial sector in Germany are sending conflicting signals.
Last week's manufacturing data in Germany left investors with more questions than answers.
Following the summer recess, the U.K. Government has turned to the unenviable task of weighing up how much economic pain to endure in order to reduce immigration. The Government's insistence that Brexit "must mean controls on the numbers of people who come to Britain from Europe" suggests it is prepared to sacrifice access to the single market in order to appease public opinion.
One bad month proves nothing, but our first chart shows that October's auto sales numbers were awful, dropping unexpectedly to a six-month low.
India's PMIs for October were grim, indicating minimal carry-over of energy from the third quarter rebound.
The Brazilian central bank cut the benchmark Selic interest rate by 25bp, to 4.25%, on Wednesday night, as expected.
Always expect the unexpected in a bonus month for Japanese wages.
The rapid escalation of Covid-19 cases in Korea in recent weeks has broadened the likely damage to the economy this quarter.
Data released on Wednesday, along with the BCB's press release on Tuesday, supported our longstanding forecast of further rate cuts in Brazil in the very near term.
In today's Monitor, we'll let the economy be, and focus instead on what are fast becoming the two defining political issues for the EU and its new Commission, namely migration and climate change.
The pushback from within the President's own party against the proposed tariffs on Mexican imports has been strong; perhaps strong enough either to prevent the tariffs via Congressional action, or by persuading Mr. Trump that the idea is a losing proposition.
We're expecting a 175K increase in December payrolls today. Our forecast has been nudged down from 190K in the wake of the ADP employment report, which was slightly weaker than we expected.
We think today's February payroll number will be reported at about 140K, undershooting the 175K consensus.
Yesterday's minutes of the October 31 COPOM meeting, at which the Central Bank cut the Selic rate unanimously by 50bp at 5.00%, reaffirmed the committee's post-meeting communiqué, which signalled that rates will be cut by the "same magnitude" in December.
Labor demand appears to have remained strong through August, so we expect to see a robust ADP report today.
Markets were jolted yesterday by news that the U.S. Fed is mulling ending, or at least slowing, the reinvestment of Treasuries and mortgage-backed securities later this year. Such a move would reduce liquidity in global markets that has underpinned soaring equity prices in recent years.
The elevated September ISM non-manufacturing index reported yesterday--it dipped to 56.9 but remains very high by historical standards--again served to underscore the depth of the bifurcation in the economy. The services sector, boosted by the collapse in gasoline prices and the strong dollar, is massively outperforming the woebegone manufacturing sector.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
Judging by interactions with readers in the past few weeks, fiscal policy is one of the most important topics for EZ investors as we move into the final stretch of the year.
The 0.7% month-to-month rise in industrial production in September marked the sixth consecutive increase, a feat last achieved 23 years ago.
German manufacturing data are all over the place at the moment. Earlier this week, data showed that new orders jumped toward the end of 2016, but yesterday's industrial production report was a shocker. Output plunged 3.0% month-to-month in December, pushing the year-over-year rate down to -0.7% from a revised +2.3% in November.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
The release of October's GDP report on Tuesday likely will be overshadowed by campaigning ahead of Thursday's general election.
The ECB made no changes to its policy stance yesterday. The central bank left its refinancing and deposit rates at 0.00% and -0.4%, respectively, and maintained the pace of QE at €60B per month. The program will run until December "or beyond, if necessary."
Friday's factory orders report in Germany provided a bit of relief amid the gloom in manufacturing.
Markets clearly love the idea that the "Phase One" trade deal with China will be signed soon, at a location apparently still subject to haggling between the parties.
In contrast to the strong December trade numbers in France--see here--yesterday's German data were soft. The seasonally adjusted trade surplus dipped to €21.5B in December, from €22.3B in November.
The German manufacturing sector appears to have settled into an equilibrium of sustained misery.
The industrial sector went from strength to strength in 2017. Year-over-year growth in production picked up to 2.1%--its highest rate since 2010--from 1.3% in 2016.
The consequences of sterling's sharp depreciation for inflation were brought home yesterday by the news that the iPhone 7 will cost more than its predecessor. The entry-level version is priced at £60 more than its iPhone 6S equivalent. Of course, the new version is more advanced, but the fact that the dollar price held steady, at $649, demonstrates the U.K. price hike entirely is due to the adverse impact of the weaker pound.
Leave it to an economist to tell contradictory stories; German manufacturing orders, at the start of the year, rose at their fastest pace since 2014, but it doesn't mean anything.
Friday's industrial production data in Germany added to the manufacturing optimism following the sharp rise in new orders--see here--reported earlier in the week.
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
Headline inflation in Brazil remained low in October, and even breached the lower bound of the BCB's target range.
Manufacturers in Germany endured another miserable quarter in Q3.
The verdict is in.
The contrast between November's very modest 67K ADP private payroll number and the surprising 254K official reading was startling, even when the 46K boost to the latter from returning GM strikers is stripped out.
The Brazilian Central Bank's policy board--the Copom--voted unanimously on Wednesday to keep the Selic rate on hold at 6.50%.
Japanese firms hand out a significant portion of labour compensation through bonuses, with the largest lump awarded in December.
Mortgage applications have risen, net, over the past couple of months, despite the 70bp surge in 30-year mortgage rates since the election. Indeed, we'd argue that the increase in applications is a result of the spike in rates, because it likely scared would-be homebuyers, triggering a wave of demand from people seeking to lock-in rates, fearing further increases.
Colombia was the fastest growing LatAm economy in 2019, due mostly to strong domestic demand, offsetting a sharp fall in key exports.
The ink has hardly dried on economists' and the ECB's inflation projections for 2020, but we suspect that some forecasters are already considering ripping up the script.
Demand in German manufacturing rebounded slightly at the end of Q1, though the overall picture for the sector remains grim.
In our Friday Monitor, we came to the conclusion that prescriptions arising from Modern Money Theory have been designed primarily with the U.S. in mind.
India's prime minister, Narendra Modi, yesterday held his last cabinet meeting before the general election.
China's FX reserves fell to $3,134B in February, from $3,161B in January, after a year of gains.
The German manufacturing data remain terrible. Friday's factory orders report showed that new orders plunged 2.2% month-to-month in May, convincingly cancelling out the 1.1% cumulative increase in March and April.
Friday's early EZ CPI data for December were red hot. Headline HICP inflation in Germany jumped to 1.5%, from 1.3% in November, while the headline rate in France increased by 0.4pp, to 1.6%.
Yesterday's news that the business activity index of the Markit/CIPS services survey fell again in January, to just 50.1--its lowest level since July 2016--has created a downbeat backdrop to the MPC meeting; the minutes and Q1 Inflation Report will be published on Thursday.
The underlying trend in payroll growth ought to be running at 250K-plus, based on an array of indicators of the pace of both hiring and firing. The past few months' numbers have fallen far short of this pace, though, for reasons which are not yet clear. We are inclined to blame a shortage of suitably qualified staff, not least because that appears to be the message from the NFIB survey, which shows that the proportion of small businesses with unfilled positions is now close to the highs seen in previous cycles. If we're right, payroll growth won't return to the 254K average recorded in 2014 until the next cyclical upturn, but quite what to expect instead is anyone's guess.
China's current account surplus was revised down last week to $46.2B in Q2, from $57.0B in the preliminary data, marking a dip from $49.0B in Q1.
Thursday and Friday were busy days for LatAm economy watchers. In Brazil, the data underscored our view that the economy is on the mend, but the recent upturn remains shaky, and external risks are still high.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
We have spent the past few weeks shifting our story on the EZ economy from one focused on slowing growth and downside risks to a more balanced outlook. It seems that markets are starting to agree with us.
Brazil's domestic economic outlook has not changed much recently.
We have no reason to think the underlying trend in payroll growth has changed--the 235K average for the past three months is as good a guide as any--but the balance of risks points clearly to a rather lower print for August. Two specific factors, neither of which have any bearing on the trend, are likely to have a significant influence on the numbers, and both will work to push the number below the 217K consensus.
We were worried about downside risk to yesterday's ADP employment measure, but the 67K increase in November private payrolls was at the very bottom of our expected range.
Over the summer, both Chancellor Javid and PM Johnson appeared to be repositioning the Conservatives, claiming that the era of austerity was over and that higher levels of spending and investment were justified.
Yesterday's data showed that the euro area PMIs were a bit stronger than initially estimated in November.
While we were out, most of the core domestic economic data were quite strong, with the exception of the soft July home sales numbers and the Michigan consumer sentiment survey.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
Markets were left somewhat disappointed yesterday by the G7 statement that central banks and finance ministers stand ready "to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
India's GDP report for the fourth quarter surprised to the upside, with the economy growing by 4.7% year-over-year, against the Bloomberg median forecast of 4.5%.
Implied volatility on the euro is now so low that we're compelled to write about it, mainly because we think the macroeconomic data are hinting where the euro goes next.
The rebound in the ISM manufacturing index was a relief, after the sharp drop in October, though the strength in last week's Chicago PMI meant that it wasn't a complete surprise.
The ADP employment report was on the money in October at the headline level--it undershot the official private payroll number by a trivial 6K--but the BLS's measure was hit by the absence of 46K striking GM workers from the data.
The Chancellor's decision immediately to spend all the proceeds from the OBR's upgrade to its projections for tax receipts appears to leave his plans exposed to future adverse revisions to the economic outlook.
The national accounts look set to show that GDP growth in the fourth quarter was even stronger than previously estimated. Earlier this month, quarter-on-quarter growth in construction output in Q4 was revised up to 1.2%, from 0.2%. As a result, construction's contribution to GDP growth will rise by 0.07 percentage points.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
Colombia's central bank has found a relatively sweet spot.
In trade-weighted terms, sterling finished 2017 just 1% higher than at the start of the year, reversing little of 2016's 14% drop.
We aren't in the business of trying to divine the explanation for every twist and turn in the stock market at the best of times, and these are not the best of times.
Let's say we are right, and global yields go up this year. Somewhere in the world, imbalances will be exposed, causing financial ructions and damaging GDP growth.
The near-term performance for EZ manufacturing will be a tug-of-war between positive technical factors, and a still-poor fundamental outlook.
The PBoC yesterday cut its 7-day and 14-day reverse repo rate by 10bp, to 2.40% and 2.55% respectively, while injecting RMB 1.2T through open market operations.
We often have quite strong views on the balance of risks in the monthly payroll numbers. November is not one of those months. We can generate plausible forecasts between about 50K and 370K, and that's much too wide for comfort. This is probably a payroll release to sit out.
The key data originally scheduled for today--ADP employment and the ISM non-manufacturing survey, and the revised Q3 productivity and unit labor costs-- have been pushed to Thursday because the federal government will be closed for the National Day of Mourning for president George H. W. Bush.
The meta game between China and Mr. Trump started as soon as he had any possibility of winning the election in 2016.
October payrolls were stronger than we expected, rising 128K, despite a 46K hit from the GM strike.
August's 14-year high in the ISM manufacturing index, reported yesterday, clearly is a noteworthy event from a numerology perspective, but we doubt it marks the start of a renewed upward trend.
Labor demand, as measured by an array of business surveys, clearly slowed from the cycle peak, recorded late last year.
Markets tend to take an eclectic view on macroeconomic data in the Eurozone.
Yesterday's detailed Q3 growth data in the Eurozone offered no surprises in terms of the headline.
Productivity likely rose by 1.7% last year, the best performance since 2010.
The jump in the Caixin services PMI in the past two months looks erratic, with holiday effects playing a role, though there could be more going on here.
We are not concerned by the very modest tightening in business lending standards reported in the Fed's quarterly survey of senior loan officers, published on Monday.
Argentina's economy was improving late last year, albeit slowing at the margin, according to the latest published indicators. GDP data confirmed that the revival continued during most of Q4, with the economy growing 0.4% month-to-month in November.
The record 1,178-point drop in the Dow will garner all the headlines today, but a sense of perspetive is in order, despite the chaos. The 113-point, or 4.1%, fall in the S&P 500 was very startling, but it merely returned the index to its early December level; it has given up the gains only of the past nine weeks.
Yesterday's final PMI data in the Eurozone were better than we expected.
When the BoJ tweaked policy back in July, we think the increase in flexibility in part was to lay groundwork for the BoJ to respond to the Fed's ongoing hiking cycle.
In recent months we've been thinking more deeply about the themes for the next economic cycle for China, and its impact on the world.
Just how low would sterling go in the event of a no-deal Brexit? When Reuters last surveyed economists at the start of June, the consensus was that sterling would settle between $1.15 and $1.20 and fall to parity against the euro within one month after an acrimonious separation on October 31.
Japan's monetary base growth showed further signs of stabilisation in May, at 8.1% year-over-year, edging up trivially from 7.8% in April.
The opening gambits in the post-Brexit trade negotiations were played earlier this week, in speeches from U.K. Prime Minister Boris Johnson and EU chief negotiator, Michel Barnier.
Our composite index of employment indicators, based on survey data and the official JOLTS report, looks ahead about three months.
Brazil's December industrial production report, released yesterday, confirmed that the recovery was stuttering at the end of last year.
The comforting 183K increase in February private payrolls reported by ADP yesterday likely overstates tomorrow's official number.
It will take a while for the economic data in the euro area fully to reflect the Covid-19 shock, but the incoming numbers paint an increasingly clear picture of an improving economy going into the outbreak.
Yesterday's final manufacturing PMIs for October were grim, but they told investors nothing they don't already know.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
Economic conditions are deteriorating rapidly in Chile, despite the relatively decent Imacec reading for Q3.
China's National People's Congress is set to convene its annual meeting next week.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
Chancellor Hammond likely will broadly stick to the current plans for the fiscal consolidation to intensify next year when he delivers his second Budget on Thursday.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
December's consumer prices report looks set to show that CPI inflation was stable at 1.5%--in line with the consensus--though the risks are skewed to the downside.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
When Park Geun-hye came to power in Korea 2013, it was to cheers of "economic democratisation". At the time, I wrote a report with a list of reforms that would be needed for Korea to "economically democratise".
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
PM Abe last week asked the cabinet to put together a package of measures in a 15-month budget aimed at bolstering GDP growth through productivity enhancement, in addition to the shorter-term goal of disaster recovery.
Chile's market volatility and high political risk continue, despite government efforts to ease the crisis.
LatAm currencies have suffered in recent weeks. Each country has its own story, so the currency hit has been uneven, but all LatAm economies share one factor: Fear of the start of a Fed tightening cycle.
Next week is so crammed full of data releases that we need to preview November's consumer price data early, in the eye of the storm of the general election.
The Eurozone's external surplus recovered a bit of ground mid-way through the third quarter.
Chancellor Sunak's "temporary, timely and targeted" fiscal response to the Covid-19 outbreak, and the BoE's accompanying stimulus measures, won't prevent GDP from falling over the next couple of months.
Hopes that GDP growth might be boosted soon by a pick-up in net exports continue to be undermined by the latest data.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
In previous Monitors--see here--we've suggested that, thanks to the coronavirus, China simply will lose some of the spending that would have gone on during the holiday this year.
The Fed paved the way with a 50bp emergency rate cut on March 3, with more to come.
Mrs. May looks set to lose the second "meaningful vote" on the Withdrawal Agreement-- WA--today, whether she decides on a straightforward vote or one asking MPs to b ack it if some hypothetical concessions are achieved.
The Board of the Bank of Korea will meet again in less than a week's time for this year's penultimate meeting.
The headline figures from yesterday's GDP report gave a bad impression. September's 0.1% month-to- month decline in GDP matched the consensus and primarily reflected mean-reversion in car production and car sales, which both picked up in August.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
The rate of deterioration in the labour market remains gradual enough for the MPC to hold back from cutting Bank Rate over the coming months.
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
The rate of growth of nominal core retail sales substantially outstripped the rate of growth of nominal personal incomes, after tax, in both the second and third quarters.
October's 0.1% month-to-month fall in retail sales volumes was disappointing, following substantial improvements in the CBI, BRC and BDO survey measures.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
Friday's data added further colour to the September CPI data for the Eurozone.
Data released yesterday from Brazil support our view that the economic recovery continues, but progress has been slow.
"Is EZ fiscal stimulus on the way?" is a question that we receive a lot these days.
The "Phase One" China trade deal announced late last week is a step in the right direction, but a small one. With no official text available as we reach our deadline, we're relying on media reporting, but the outline of the agreement is clear.
Markets greatly cheered the Conservatives' landslide victory on Friday, but remained cautious on the potential for the MPC to return to the tightening cycle it started in 2017.
ate last week, China and the U.S. reached an agreement, averting the planned U.S. tariff hikes on Chinese consumer goods that were slated to be imposed on December 15.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
The fall in CPI inflation to just 1.5% in October-- its lowest rate since November 2016--from 1.7% in September, isn't a game-changer for the monetary policy outlook.
Data released yesterday in Brazil are consistent with our view that private consumption will continue to drive the recovery over the second half, offsetting the ongoing weakness in private investment.
Many commentators have assumed that the new Chancellor's pledge to "reset" fiscal policy and to stop targeting a budget surplus in this parliament means that fiscal policy will support growth in economic activity next year.
In the olden days, by which we mean the 15 years or so leading up to the financial crisis, a 100bp rise in long yields would be enough to slow GDP growth by about three percentage points, other things equal, after a lag of about one year.
Chancellor Javid's resignation, only eight months after assuming the role, is the clearest sign yet that the Johnson-led government wants fiscal policy to play a bigger part in stimulating the economy over the next couple of years.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
Germany's newly-appointed finance minister, Olaf Scholz, proudly announced earlier this month that his country would be running a budget surplus of €63B over the next four years--about 1.9% of GDP between now and 2022--some €14B more than initially estimated.
Japan's unadjusted current account surplus fell sharply in November, to ¥757B, from ¥1,310B in October.
Our base case is that the core CPI rose 0.2% in December, but the net risk probably is to the upside. We see scope for significant increases in sectors as diverse as used autos, apparel, healthcare, and rent, but nothing is guaranteed.
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
China concludes its annual Central Economic Work Conference today, where the economic targets and the agenda for next year are set.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
We can't quibble with the consensus that GDP likely rose by 0.2% month-to-month in December, reversing only two-thirds of November's drop.
China's January trade data were scheduled for release on Friday, but instead, the customs authority delayed the publication, saying it would publish the numbers with the February data
Friday was a busy day in the Eurozone. The final and detailed GDP report confirmed that growth in the euro area slowed to 0.2% quarter-on-quarter in Q3, from 0.4% in Q2, with the year-over-year rate slipping by 0.6 percentage points to 1.6%, just 0.1pp below the first estimate.
Friday's industrial production data in the core EZ economies, for December, were startlingly poor. In Germany, industrial production plunged by 3.5% month-to-month, comfortably reversing the revised 1.2% rise in November.
Our forecast of a solid 190K increase in headline December payrolls ignores our composite employment indicator, which usually leads by about three months and points to a print of just 50K or so.
September's industrial production figures likely will not surprise markets today. We look for a 0.3% month-to-month rise in production, matching the consensus and the ONS assumption in the preliminary estimate of Q3 GDP.
Friday's data provided the first bit of evidence that manufacturing in the Eurozone is headed for a slowdown in Q2, partly reversing the strength in Q1.
Yesterday's industrial production report in Germany was much better than implied by the poor new orders data--see here--released earlier this week.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
The Conservatives successfully have defended their average poll lead over Labour of 10 percentage points over the last week.
The Office for Budget Responsibility has decided to press ahead with the publication of new fiscal forecasts on November 7, despite the government's decision to postpone the Budget until after the next election.
External conditions continue to favour Brazil. The recovery in domestic demand in the world's major economies, particularly the rebound in business investment, has driven a gradual revival of global exports.
The consensus view that industrial production rose by a mere 0.1% month-to-month in August looks far too low; we expect today's report to reveal a jump of about 1%.
We expect to see a 70K increase in October payrolls today.
The Brazilian Central Bank's policy board-- COPOM--voted unanimously on Wednesday to cut the Selic rate by 50bp to 5.00%, as expected.
June's trade figures yesterday highlighted that it takes more than just a few months for exchange rate depreciations to boost GDP growth. The trade-weighted sterling index dropped by 9% between November and June as the risk of Brexit loomed large and the prospect of imminent increases in interest rates receded.
Yesterday's trade data added to the evidence that momentum in the German economy slowed sharply at the start of the year.
Brazilian assets were hit in Q3 by global external challenges, while domestic fundamentals gradually improved.
The U.K.'s dependence on large inflows of external finance was laid alarmingly b are last week, when "hard" Brexit talk by politicians caused overseas investors to give sterling assets a wide berth. Investors now are demanding extra compensation for holding U.K. assets, because the medium-term outlook is so uncertain.
Industrial production hit its stride last year, notching up eight consecutive month-to-month gains--the longest run of unbroken growth since May 1994--before a setback in December, which was triggered by the temporary closure of the Forties oil pipeline.
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
Mexico's inflation remains the envy of LatAm, having consistently outperformed the rest of the region this year. Headline inflation slowed marginally to 2.5% in October, a record low and below the middle of Banxico's target, 2-to-4%, for the sixth straight month. The annual core rate increased marginally to 2.5% in October from 2.4% in September, but it remains below the target and its underlying trend is inching up only at a very slow pace. We expect it to remain subdued, closing the year around 2.7% year-over-year. Next year it will gradually increase, but will stay below 3.5% during the first half of 2016, given the lack of demand pressures and the ample output gap.
October's consumer prices report, released on Wednesday, likely will show that CPI inflation has continued to drift further below the 2% target
Friday's data force us to walk back our recession call for Germany. The seasonally adjusted trade surplus rose in September, to €19.2B from €18.7B in August, lifted by a 1.5% month-to-month jump in exports, and the previous months' numbers were revised up significantly.
Yesterday's economic reports in the Eurozone were ugly.
The latest GDP data continue to show that the economy is holding up well, despite the Brexit saga.
Today's general election looks set to be a closer race than opinion polls suggested two weeks ago.
The sluggishness of consumers' spending and business investment in the first quarter means that hopes of a headline GDP print close to 2% rely in part on the noisier components of the economy, namely, inventories and foreign trade.
Today's industrial production data in the Eurozone will extend the run of soft headlines at the start of the year.
The popular belief that economists rarely agree about anything is reinforced by the extremely wide dispersion of forecasts for March industrial production. The forecasts range from the wildly optimistic prediction of a 1.9% month-to-month rise, to a downright miserable 0.3% decline. We think production rose by about 0.5% month-to-month, and this likely will be interpreted as a decent result, following the recent run of bad news.
French manufacturing came roaring back at the end of Q1. Industrial production jumped 2.0% month-to- month in March, driving the year-over-year rate higher to +2.0%, from a revised -0.7% in February.
The MPC's asserted its independence in the minutes of December's meeting, firmly stating that there is "no mechanical link between UK policy and those of other central banks". Markets have interpreted this as supporting their view that the MPC won't be rushed into raising interest rates by the Fed's actions. Investors now expect a nine-month gap between the Fed hike we anticipate next week, and the first move in the U.K.
Markets rightly placed little weight on October's below-consensus GDP report yesterday, and still think that the chances of the MPC cutting Bank Rate within the next six months are below 50%.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
At first glance, the continued weakness of domestically-generated inflation, despite punchy increases in labour costs, is puzzling.
Inflation appears no longer to be an issue for Mexican policymakers. The annual headline rate slowed to 3.0% year-over-year in February from 3.1% in January, in the middle of the central bank's target range, for the first time since May 2006.
It's still unclear how exactly Covid-19 will impact the euro area as a whole, but little doubt now remains that Italy's economy is in for a rough ride.
Markets' inflation expectations have fallen in recent weeks, maintaining the trend seen over the previous 18 months. The fall in expectations for the next year or so is justified by the sharp fall in oil prices. But expectations for inflation further ahead have drifted down too, even though lower oil prices will have no effect on the annual comparison of prices beyond a year or so from now.
The new Argentinian president, Alberto Fernández, will have to make a quick start on the titanic task of cleaning up the economic and social mess left by his predecessor, Mauricio Macri.
Long-standing readers will know that we have been downbeat on the potential for net external trade to boost the economy following sterling's 2016 depreciation.
Banxico cut its policy rate by 25bp to 7.25% yesterday, as was widely expected, following similar moves in August, September and November.
Under normal circumstances, the 0.23% increase in the core CPI, reported earlier this month, would be enough to ensure a 0.2% print in today's core PCE deflator.
Inflation in the Eurozone eased at the start of Q3.
The EZ's current account surplus is solid as ever, despite falling slightly in February to €35.1B, from an upwardly-revised €39.0B in January.
The run of weak retail sales figures continued yesterday, with the release of November's official data.
The PBoC late on Wednesday announced measures to provide medium-term funding for smaller businesses.
The euro area's current account surplus stumbled at the end of 2017, falling to €29.9B in December from an upwardly-revised €35.0B in November.
Colombia's oil industry--one of the key drivers of the country's economic growth over the last decade--has been stumbling over recent months, raising concerns about the country's growth prospects. But the recent weakness of the mining sector is in stark contrast with robust internal demand and solid domestic production.
Wednesday's State Council meeting implies that the authorities are starting to take more serious coordinated fiscal measures to counter the virus threat to the labour market and to banks.
Argentina's government continues to show signs of reining in fiscal policy, with the primary budget balance improving steadily over the last year.
The U.S. reached a trade agreement with Canada on Sunday, adding its northern neighbour to the pact sealed a month ago with Mexico.
China's official manufacturing PMI was unchanged at 50.2 in December, marking a weak end to the year. But it could have been worse; we had been worried that the return to above-50 territory in November had been boosted by temporary factors. December's print allays some of those fears.
While were out over the holidays, the single biggest surprise in the data was yet another drop in imports, reported in the advance trade numbers for November.
The 2010s were the first decade since reliable records begin--in the 1700s--in which a recession was completely avoided
A sharp ARS sell-off was the key highlight while we were away over the holidays.
The number of Covid-19 cases is increasing at a faster rate, though 89% of the new cases reported Saturday were in China, South Korea, Italy and Iran.
Last week's national accounts were a setback for the hawks on the MPC seeking to raise interest rates at the next meeting, on November 2.
This week has seen a huge wave of data releases for both January and February, but the calendar today is empty save for the final Michigan consumer sentiment numbers; the preliminary index rose to a very strong 99.9 from 95.7, and we expect no significant change in the final reading.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
The Eurozone's external accounts were extremely volatile at the end of Q4.
China's current account surplus grew further in the final quarter of 2018, more than doubling to $54.6B, from $23.3B in Q3.
The Eurozone's current account surplus almost surely fell further in Q4.
Once again, Chinese January data released so far suggest that the Phase One trade deal was the dominant factor dictating activity for the first two- thirds of the month, with the virus becoming a real consideration only in the last third.
The details of next year's Japanese budget are not yet official and the Chinese budget remains unknown. But the main figures of the Japanese budget are available, while China's Economic Work Conference, which concluded yesterday, has set out the colour of the paint for the budget, if not the actual brush strokes.
Chile's Q2 GDP report, released on Friday, confirmed that the economy gathered momentum in recent months, following an alarmingly weak start to the year.
Abenomics has had its successes in changing the structure of Japan. Notably, large numbers of women have gone back to work and corporations have started paying dividends. These are by no means small victories. But overall, the macroeconomy is essentially the same as when Shinzo Abe became prime minister.
LatAm investors' concerns about U.S. monetary policy expectations and the broad direction of the USD should on the back burner until the Fed hikes again, likely in September. This will leave room for country-specific drivers to take centre stage. That should support Mexico's MXN, which already has risen 14% year-to-date against the USD, erasing its losses after the US election last November.
Japanese trade remained in the doldrums in October, keeping policymakers on their toes as they repeat the refrain of "resilient" domestic demand.
The Brazilian BRL has remained relatively stable year-to-date, following a strong rebound in January. But downward pressures have re-emerged over the last two months, as shown in our first chart.
The federal debt ceiling was re-imposed last week, with no fanfare, and no reaction in the markets. All eyes were focussed instead on the Fed's rate hike and Chair Yellen's press conference.
Ahead of the release of the retail sales report for December 2018, markets expected to see unchanged non-auto sales.
Mr. Trump fired the shot everyone was expecting this week with a 10% tariff on $200B-worth of Chinese goods, and a pledge to lift the rate to 25% on January 1.
The euro area's trade advantage with the rest of the world slipped at the start of the year.
Today brings more housing data, in the form of the May existing home sales numbers.
Argentina's inflation ended 2019 badly, and it is still too early to bet on a protracted downtrend, even after the renewed economic slowdown.
Prospects for further rate cuts in Brazil, due to the sluggishness of the economic recovery and low inflation, have played against the BRL in recent weeks.
CPI inflation in India jumped to 4.6% in October, from 4.0% in September, marking a 16-month high and blasting through the RBI's target.
Hopes that the economy will not slow over the next year are largely pinned on the idea that net trade will be boosted by the drop in sterling. The pound has tracked sideways over the last two months and is about 15% below its trade-weighted peak in November 2015.
The Eurozone's external surplus rebounded slightly at the start of Q3.
The passage of the House tax cut bill does not guarantee that the Senate will follow suit with its own bill, still less that both chambers will then be able to agree on a single bill which can then b e signed into law. As
The key detail in Friday's barrage of economic data was the above-consensus increase in EZ inflation.
The Andean economies haven't been immune to the turmoil roiling the global economy in the past few weeks.
The euro area's trade surplus slipped further mid- way through the second quarter; falling to a 15-month low of €16.9B in May, from a downwardly-revised €18.0B in April, and extending its descent from last year's peak of nearly €24.0B.
In our daily Monitors we've talked about the four paths that we see for the Chinese economy over the medium-to-long term. First, China could make history and actively transition to private consumption-led growth.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
Yesterday's trade data showed that the Eurozone's external balance continues to improve markedly. The seasonally adjusted trade surplus in the euro area rose to €23.3B in December, a new all-time high, from a revised €21.6B in November.
Recent data in Argentina confirm the resilience of cyclical upturn.
Banxico is one of the few central banks in LatAm to have hiked rates in 2016, and we expect it to remain relatively hawkish in the face of external risks.
Boeing's announcement that it will temporarily cut production of 737MAX aircraft to zero in January, from the current 42 per month pace, will depress first quarter economic growth, though not by much.
Banxico will meet tomorrow, and we expect Mexican policymakers to cut the main interest rate by 25bp, to 7.25%.
Economic data in Brazil over the second quarter were relatively positive, and June reports released in recent weeks, coupled with leading indicators for July, are encouraging.
Over the past 30 years China's role in LatAm and the global economy has increased sharply. Its share of world trade has surged, and its exports have gained significant market share in LatAm.
Data on air quality in China provide some useful insights into the economic disruptions--or lack thereof--caused by the outbreak of the coronavirus from Wuhan and the government's aggressive containment measures.
The Chinese authorities have been out in force in the last few days, aiming to reassure markets and the populace that they are ready and able to support the economy, after abysmal trade data on Monday.
The euro area's external surplus remained resilient toward the end of 2017, in the face of a stronger currency. The seasonally adjusted trade surplus rose to €22.5B in November, from €19.0B in October, lifted primarily by a jump in German exports.
We're reasonably happy with the idea that business sentiment is stabilizing, albeit at a low level, but that does not mean that all the downside risk to economic growth is over.
Last week's hard data in Colombia were upbeat, confirming that economic growth accelerated in the first half. Retail sales rose 5.9% year-over-year in May, overshooting consensus.
Evidence of accelerating economic activity in Colombia continues to mount, in stark contrast with its regional peers and DM economies.
On the face of it, December's flash Markit/CIPS PMIs warrant the MPC cutting Bank Rate at its meeting on Thursday.
Incoming activity data from Colombia over the past quarter have been surprisingly strong, despite many domestic and external threats.
The November industrial production numbers will be dominated by the rebound in auto production following the end of the GM strike.
The labour market remains healthy enough to persuade the MPC to keep its powder dry over the coming months.
Mr. Macron will be in Berlin today with the message that France wants a strong Eurozone and a tight relationship with Germany. Friendly overtures between Paris and Berlin are good news for investors; they reduce political uncertainty while increasing the chance that the economic recovery will continue. But it is too early to get excited about closer fiscal coordination, let alone a common EZ fiscal policy and bond issuance.
Italian bond yields have remained elevated this week, following the release of the government's detailed draft budget for 2019.
The People's Bank of China cut its seven-day reverse-repo rate yesterday, to 2.50% from 2.55%.
Chile's Q3 GDP report, released yesterday, confirmed that the economy gathered speed in the third quarter, but this is now in the rearview mirror.
On the face of it, trade negotiations have deteriorated in the last week.
Data released last week confirm that the Argentinian economy finally is stabilizing.
President Trump wrote to Congress on Monday, saying that the U.S. finally has reached a trade deal with Japan, about a month after he and Prime Minister Abe announced an agreement in principle, on the sidelines of the G7 Summit in France.
Brazil's December economic activity index, released last week, showed that the economy ended the year on a relatively weak footing. The IBC-Br index, a monthly proxy for GDP, fell 0.3% month- to-month, pushing down the adjusted year-over- year rate to 0.3%, from a downwardly-revised 0.7% increase in November.
Bond yields in Italy remain elevated, but volatility has declined recently; two-year yields have halved to 0.7% and 10-year yields have dipped below 3%.
Colombian activity data released this last week were upbeat, better than we expected, showing a significant pickup in manufacturing output and improving retail sales. Retail sales rose 3.1% year- over-year, after a modest 1.0% increase in June.
India's industrial production data last week are the last set of key economic indicators for the fourth quarter, before next week's Q4 GDP report.
China's National People's Congress this year was the most significant in years and followed 12 months of lightning-speed change in the country.
Colombia's GDP report, released last week, confirmed that it was the fastest growing economy in LatAm and everything suggests that it likely will lead the ranking again this year.
China's data on Monday were beyond dire, leading to a dramatic downward revision of our already grim Q1 GDP forecasts for the country.
No subject in the EZ economy is a source of more dispute than Germany's ballooning current account surplus. The Economist recently identified he German surplus as a problem for the world economy.
We've continuously warned that Japan's national accounts weren't sitting easily with the underlying signals from survey data, and monetary conditions, through last year.
Most of the Andean economies have been hit by the turmoil roiling the global economy in the past few quarters. But modest recovery in commodity prices in Q3, and relatively solid domestic fundamentals helped them to avoid a protracted slowdown in Q2 and most of Q3.
China's investment slowdown went from worrying to frightening in October. Last week's fixed asset investment ex-rural numbers showed that year- to-date spending grew by 5.2% year-over-year in October, marking a further slowdown from 5.4% in the year to September.
Argentinians are heading to the polls on Sunday October 27 and will likely turn their backs on the current president, Mauricio Macri.
The next couple of rounds of business surveys will capture firms' responses to the Phase One trade deal agreed last week, though the news came too late to make much, if any, difference to the December Philly Fed report, which will be released today.
CPI inflation held steady at 1.5% in November, marking the fourth consecutive below-target print, though it was a tenth above both the MPC's forecast and the consensus.
Argentina's economy is firing on all cylinders, thanks to improving fundamentals and a positive external backdrop.
Data released earlier this week show that Japan's current account surplus continued its downtrend in October, falling to ¥1,404B, on our seasonal adjustment, from ¥1,494B in September.
David Bahnsen, managing partner and chief investment officer of the Bahnsen Group, and Ian Shepherdson, chief economist at Pantheon Macroeconomics, join "Squawk Box" to discuss the markets and the government measures being taken to stimulate the economy amid the coronavirus outbreak.
Yesterday's wall of data told us a bit about where the economy likely is going, and a bit about how it started the first quarter. The January trade and inventory data were disappointing, but the February Chicago PMI and consumer confidence reports were positive.
As we reach our Sunday afternoon deadline, Hurricane Irma is pounding Florida's west coast with an intensity not seen since Andrew, in 1992.
Eurozone current account data yesterday provided further evidence of stabilisation in the economy despite a headline deterioration. The adjusted current account surplus fell to €18.1B in November from a revised €19.5B in October, but the decline was mainly driven by an increase in current transfers; the core components remain solid.
The third quarter national accounts, due to be published on Friday, likely will not alter the picture of economic resilience immediately after the referendum. The latest estimate of GDP growth often is revised in this release, but revisions have not exceeded 0.1 percentage points in either direction in the last four years, as our first chart shows.
August's public finances figures, released last week, were an unwelcome but manageable setback for the Chancellor.
okThe weekend's election result in Spain provided relief for investors anxiously looking for another "surprise." Exit polls on Sunday showed a big majority for the anti-establishment party Podemos, but in the end Spanish voters opted for safety. The incumbent Partido Popular, PP, was the election's big winner compared with the elections six months ago, gaining 15 seats.
Premier Li Keqiang rounded out the National People's Congress with his press conference yesterday.
The EU Commission and Italy's government remain at loggerheads over the country's fiscal plans next year.
After many years in which the phrase "twin deficits" was never mentioned, suddenly it is the explanation of choice for the weakening of the dollar and the sudden increase in real Treasury yields since the turn of the year, shortly after the tax cut bill passed Congress.
Brazil's external accounts continue to be the country's bright spot, having improved considerably in recent quarters. The unadjusted current account deficit for January, USD4.8B, was lower than expected and much smaller than the USD12.2B shortfall a year earlier.
Brazil's external accounts were the bright spot last year, once again, but the ne ws will soon take a turn for the worse. The current account deficit fell to just USD24B last year, or 1.3% of GDP, from USD59B in 2015. The improvement was driven by the trade surplus, which rose to USD48B, the highest since 1992, when the comparable data series begins. A 20% plunge in imports, coupled with a mere 3% dip in exports, explain the rising trade surplus.
In the absence of reliable advance indicators, forecasting the monthly movements in the trade deficit is difficult.
Progress in reducing the budget deficit has ground to a virtual halt, despite the ongoing fiscal consolidation. Public sector net borrowing excluding public sector banks--PSNB ex.--was £10.6B in September, exceeding the £9.3B borrowed in the same month last year.
Brazil's external accounts have recovered dramatically this year, and we expect a further improvement--albeit at a much slower pace--in the fourth quarter. The steep depreciation of the BRL last year, and the improving terms of trade due to the gradual recovery in commodity prices, drove the decline in the current account deficit in the first half.
The Chancellor indicated yesterday that the current fiscal plans--which set out a 1% of GDP reduction in the structural budget deficit this year--will remain in place until a new Prime Minister is chosen by September 2. So for now, the burden of leaning against the imminent downturn is on the MPC's shoulders.
China's government overshot its deficit target last year, and probably will overshoot it by at least as much this year
Mauricio Macri, the centre-right candidate of the Cambiemos--Let's Change--coalition won Argentina's weekend presidential election. Mr. Macri, the mayor of Buenos Aires, defeated Daniel Scioli, of the ruling Front for Victory--FpV--coalition on Sunday. His victory marks the end of the 12-year Kirchnerist era, characterized by wild inflation, huge public deficits and unsustainable subsidies. If Mr. Macri lives up to his promises, Argentina, the second-largest economy in South America, will become an orthodox economy on a sustainable path. The recovery will come, we think, but it will be a long and challenging process.
Mexico's external accounts remain solid, despite adverse global conditions over the past year. The current account decreased to USD9.5B, or 3.2% of GDP, in the first quarter, just down from 3.3% a year earlier. Shortfalls of USD10.3B in the income account and USD4.7B in goods and services--mostly the latter--were again the key driver of the overall deficit.
The uncertainty over the new U.S. administration's economic policies new is clouding the outlook for the Eurozone economy. The combination of loose fiscal policy and tight monetary policy in the U.S. should be positive for the euro area economy, in theory. It points to accelerating U.S. growth--at least in the near term--wider interest rate differentials and a stronger dollar. In a " traditional" global macroeconomic model, this policy mix would lead to a wider U.S. trade deficit, boosting Eurozone exports.
Brazil's current account data last week provided further evidence of stabilisation in the economy, despite the modest headline deterioration. The unadjusted current account deficit increased marginally to USD5.1B in January, from USD4.8B in January 2016, but the underlying trend remains stable, at about 1.3% of GDP. Our first two charts show that the overall deficit began to stabilize in mid-2016, as the rate of improvement in the trade balance slowed, reflecting the easing of the domestic recession.
Brazil's Vice-President, Michel Temer, has taken over as interim president, following the approval of the impeachment motion against President Dilma Rousseff, accused of using creative accounting to hide large budget deficits. The impeachment motion suspends Ms. Rousseff for now; she will be removed from office permanently if a two-thirds majority finds her guilty.
A year has now elapsed since sterling began its precipitous descent, and the trade data still have not improved. Net trade subtracted 0.9 percentage points from year-over-year growth in GDP in Q3. And while the trade deficit of £2.0B in October was the smallest since May, this followed extraordinarily large deficits in the previous two months. In fact, the trade deficit has been on a slightly deteriorating trend over the last year, as our first chart shows, and we expect today's data to show that the deficit re-widened to about £3.5B in November.
Today's trade figures likely will continue to show that the benefits from sterling's depreciation are being outweighed by the costs. Exports still are barely growing, but consumers are about to endure a substantial import price shock. The monthly trade deficit has been extremely volatile over the last year, generating a series of excessively upbeat or gloomy headlines. The truth is that the deficit has been on a slightly deteriorating trend, as our first chart shows. We think the trade deficit likely narrowed to £3.8B in December, from £4.2B in November, bringing it closer to its rolling 12-month average of £3.0B.
The two-year budget deal agreed between the administration and the Republican leadership in Congress will avert a federal debt default and appears to constitute a modest near-term easing of fiscal policy. The debt ceiling will not be raised, but the law imposing the limit will be suspended through March 2017, leaving the Treasury free to borrow as much as necessary to cover the deficit. As a result, the presidential election next year will not be fought against a backdrop of fiscal crisis.
Japan's adjusted trade balance flipped back to a modest surplus of ¥116B in February, after seven straight months of deficit.
Brazil's President Dilma Rousseff was removed from office on Wednesday, following an impeachment trial triggered by allegations that Ms. Rousseff used "creative" accounting techniques to disguise Brazil's growing budget deficit, ahead of her re-election in 2014. The Senate voted 61-20 to convict Ms. Rousseff; only 54 votes were needed to oust her. For Ms. Rousseff's leftist Workers' Party, her removal marks the end of 13 years in power.
The euro area's record-high external surplus has prompted commentators to suggest that the zone has room to loosen fiscal policy to support growth, or at least relax the deficit reduction rules.
Gilt yields slid to record lows at many maturities in mid-February, and while equity prices have since rebounded, gilt yields have remained anchored at rock-bottom levels. But with political risks rising and deficit reduction still very slow, gilt yields look primed to spring back soon.
The Eurozone's external surplus is on track for a record-breaking year in 2016. Data yesterday showed that the current account surplus rose to €28.4B in October, from €27.7B in September. The trade surplus in goods fell, but this drag was offset by a higher services and income surplus, and a lower current transfers deficit.
The external surplus in the EZ economy slipped in July. The seasonally-adjusted current account surplus dropped to €21.0B, from a revised €29.5B in June, hit by an increase in the current transfers deficit, and a falling trade surplus. The recent increase in the transfers deficit partly is due to the migrant deal with Turkey, and we expect it to remain elevated.
In recent public appearances, the Chancellor has made a concerted effort to downplay expectations of fiscal loosening in Wednesday's Autumn statement. On Sunday, he labelled the deficit "eye-wateringly" large and he warned that he was "highly constrained".
In one line: The plunge in the deficit is over, but exporters still under pressure.
Korea's current account surplus rebounded on a smaller services deficit in July
In one line: Persistently large deficit leaves sterling vulnerable in a Brexit crisis.
Japan's services PMI points to Q2 GDP contraction. China's Caixin services PMI highlights the reasons for official concern over employment. Korea's current account slips into deficit for the first time since 2012.
As we go to press, it appears that politicians in Italy have agreed on a 2019 budget deficit of 2.4% of GDP.
China's trade data looked more normal in April. The trade balance rebounded to a surplus of $28.8B in April, from a deficit of $5.0B in March. Exports also bounced back, rising 12.9% year-over-year in April, after a 2.7% decline in March.
In one line: Small deficits reflect volatility, not an emerging boost from the weaker pound.
In one line: The advance goods deficit rose to $71.4B in April from $70.9B in March, better than the consensus, $73.0B.
In one line: The first step towards mean reversion; the deficit will rise further in Q1.
In one line: Renewed stockpiling to blame for the larger deficit.
In one line: Tariff effects held the deficit down; it will rebound sharply in Q4.
In one line: Trade deficit has stabilized, provided the China talks don't fall apart.
Colombia's economy has continued to slow, due mainly to lagged effect of the oil price shock since mid-2014, and stubbornly high inflation, which has triggered painful monetary tightening. Modest fiscal expansion and capital inflows have helped to avoid a hard landing, but the economy is still feeling the pain of weakening domestic demand. And the twin deficits--though improving--remain a threat.
China's new Loan Prime Rate amounts to a rate cut, but supply-side banking strains limit its efficacy. Chinese slowdown and pre-tax front-loading keeps Japan's trade balance in deficit.
Argentina's overdue policy tightening, aimed at dealing with the country's severe inflation and fiscal problems, is underway. Printing of ARS at the central bank, the BCRA, to finance the budget, deficit has slowed and will be curbed further. Welfare spending, which accounts for nearly half of government spending, has been put on the chopping block.
The April foreign trade numbers strongly support our view that foreign trade will make a hefty positive contribution to second quarter GDP growth, after subtracting a massive 1.9 percentage points in the first. The headline April deficit fell further than we expected, thanks in part to an unsustainable jump in aircraft exports and a decline in the oil deficit, but the big story was the 4.2% plunge in non- oil imports.
China's current account dropped sharply in Q1, to a deficit of $28.2B, from a surplus of $62.3B in Q4.
Brazil's current account deficit rose to USD6.9B in April, from USD5.8B in March. The deficit totaled USD100.2B, or 4.5% of GDP on a 12-month rolling basis, marginally better than 4.6% in March; the underlying trend is flat. The services and income accounts improved slightly compared to April last year.
We were a bit surprised to see our forecast for the April trade deficit is in line with the consensus, $44B, down from $51.4B in March, because the uncertainty is so great. The March deficit was boosted by a huge surge in non-oil imports following the resolution of the West Coast port dispute, while exports rose only slightly. As far as we can tell, ports unloaded ships waiting in harbours and at the docks, lifting the import numbers before reloading those ships.
The plunge in oil prices me ans that U.S. oil imports are set to drop much further over the next few months, flattering the headline trade deficit. The trend in imports has been downwards since early 2013, as our first chart shows, reflecting the surge in domestic production. That surge is now over, but as falling prices become the dominant factor in the oil import story, the trend will remain downwards.
China's FX reserves data pointed to an about-turn in net capital flows in May, with capital leaving the country again after two months of net inflows, and a current account deficit in Q1.
External demand in France probably weakened in the first quarter. The trade deficit widened sharply to €5.2B in February, from a revised €3.9B in January, pushing the current account deficit to an 18-month high. It is tempting to blame the stronger euro, but that wasn't the whole story.
If the Chancellor is true to his word, Wednesday's Budget will be a pedestrian affair with few major policy changes designed to prevent the economy from slowing this year. In an article in The Sunday Times, Philip Hammond asserted that "we cannot take our foot off the pedal" in the mission to eliminate the budget deficit by the end of the next parliament.
In yesterday's Monitor we set out how government will have to prepare for an increase in debt issuance both to bring debts on-balance sheet and also to issue new debt as government is obliged to run deficits while the corporate sector deleverages.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, discusses Italy's budget and deficit and the potential for the nation to leave the Eurozone.
Two fiscal deadlines are on the near-horizon.
Chief U.K. Economist Samuel Tombs on the government's fiscal policy
Chief U.K. Economist Samuel Tombs on UK Government Borrowing
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